Second Administrative Reforms Commission(Second Report)-Unlocking Human Capital. Department of Administrative Reforms and Public Grievances,Ministry of Personnel,PG and Pensions,Government of India.

1. 2
SECOND REPORT
UNLOCKING HUMAN CAPITAL Entitlements and Governance - a case study
SECOND ADMINISTRATIVE REFORMS COMMISSION
UNLOCKING HUMAN CAPITAL
Entitlements and Governance – a case study
Second Administrative Reforms Commission
Government of India
2nd Floor, Vigyan Bhawan Annexe, Maulana Azad Road, New Delhi 110 011
e-mail : arcommission@nic.in website : http://arc.gov.in JULY 2006

2. GOVERNMENT OF INDIA
SECOND ADMINISTRATIVE REFORMS COMMISSION
SECOND REPORT
UNLOCKING HUMAN CAPITAL
ENTITLEMENTS AND GOVERNANCE - A CASE STUDY
JULY 2006

3. PREFACE
The National Rural Employment Guarantee Act of 2005 is a path-breaking legislation. It signals a paradigm
shift to legal entitlements, public accountability coupled with community rights, and responsive and participative
management. In the past, wage employment programmes, though well stretched, suffered for a variety of
reasons. Programme coverage was low. More than fifty per cent of beneficiaries were not from the most needy
group. Labour employed was not always from the local population. Payment made was lower than the prescribed
wage. There was disparity between wages paid to women and men. On an average, 16 to 29 days of employment
were provided to a worker per annum. Quality of assets created was not always of the requisite standard. There
were reports of forged muster roll. On the whole, wage employment programmes did not eventually achieve
what they set out to do.
The unhappy result was that even though a number of such schemes were taken up, the poor continued to
remain poor, caught in social captivity and were not enabled to participate in the mainstream process. This was
particularly true of areas plagued by extremism, and frontal and inaccessible areas where employment schemes
were taken hostage by contractors and middlemen, locking people in a seemingly perpetual cycle of poverty.
Empowering the poor is best done by breaking the barriers of unemployment, illiteracy, backwardness, ill-
health and debilitating social inequality. It is sad but true that these barriers continue to restrain the participatory
possibilities of the rural poor in the growth process. Inclusion and participation in the process of growth is
extremely important for taking the poor out of the vicious cycle of poverty. We need to note that, while the
nation is growing in a high-income trajectory, the bottom of the pyramid of the society is excluded from the
benefits of growth. Unless we target the poor aggressively on the supply side and embark on initiatives which
benefit them directly, growth and equality cannot be reinforced.
The National Rural Employment Guarantee Act (NREGA) is one such revolutionary initiative targeted
at the poor. In order to empower the poor, giving voice to them in the process of implementation of NREGA
should be the main thrust of the Scheme. Community pressure on representatives of local authorities should
demolish the traditional hierarchy of power that has disempowered the poor for so long. Such an accountability
mechanism coupled with effective community participation should give democracy back to the people.
We also need to note that the deterioration in the country’s administration and public delivery system has
affected the poor the most. It is because they are critically dependent on the availability of public services and
essential infrastructure. Corruption is one of the primary reasons why the public delivery system has not touched
the lives of the poor. We have to fight corruption aggressively if the benefits of NREGA are to reach the poor.
Extremism and Naxalism have spread to parts of more than 12 States and have taken a heavy toll. It is not
a coincidence that most of these districts represent areas of high concentration of poverty, poor governance
systems and practices, weak infrastructure and unequal power structure. These are also areas where Panchayats
are simply non-existent and in many places, non-functional. The spread of democratic space through the effective
implementation of NREGA is the only way to liberate these districts.
The Commission has undertaken a study of institutional, administrative and financial management systems
of NREGA. The study is greatly benefited by the deliberations at the National Workshops organized by the
National Institute of Public Finance and Policy, and the eGovernments Foundation. It is also benefited by inputs
from government functionaries, experts with domain knowledge, NGOs and other important stakeholders.
Based on these inputs, the Commission has recommended comprehensive reforms so that the Act can be
implemented seamlessly to benefit the poor. I am confident that, if successfully implemented, the Act will be the
harbinger of transformative changes and participative democracy in rural India.
(M Veerappa Moily)
Chairman

4. Government of India 4. The Commission may exclude from its purview the detailed examination of
Ministry of Personnel, Public Grievances & Pensions administration of Defence, Railways, External Affairs, Security and Intelligence, as also
Department of Administrative Reforms and Public Grievances subjects such as Centre-State relations, judicial reforms etc. which are already being examined
by other bodies. The Commission will, however, be free to take the problems of these sectors
Resolution into account in recommending re-organisation of the machinery of the Government or of
New Delhi, the 31 August, 2005
st
any of its service agencies
No. K-11022/9/2004-RC. — The President is pleased to set up a Commission of Inquiry to Some of the issues to be examined under each head are given in the Terms of Reference
be called the second Administrative Reforms Commission (ARC) to prepare a detailed attached as a Schedule to this Resolution
blueprint for revamping the public administration system.
5. The Commission will give due consideration to the need for consultation with the State
2. The Commission will consist of the following : Governments.
(i) Shri Veerappa Moily - Chairperson
(ii) Shri V. Ramachandran - Member 6. The Commission will devise its own procedures (including for consultations with the
(iii) Dr. A.P. Mukherjee - Member State Government as may be considered appropriate by the Commission), and may appoint
(iv) Dr. A.H. Kalro - Member committees, consultants/advisers to assist it. The Commission may take into account the
(v) Dr. Jayaprakash Narayan - Member existing material and reports available on the subject and consider building upon the same
(vi) Smt. Vineeta Rai - Member-Secretary rather than attempting to address all the issues ab initio.
3. The Commission will suggest measures to achieve a proactive, responsive, 7. The Ministries and Departments of the Government of India will furnish such information
accountable, sustainable and efficient administration for the country at all levels of the and documents and provide other assistance as may be required by the Commission. The
government. The Commission will, inter alia, consider the following : Government of India trusts that the State Governments and all others concerned will extend
their fullest cooperation and assistance to the Commission.
(i) Organisational structure of the Government of India
(ii) Ethics in governance 8. The Commission will furnish its report(s) to the Ministry of Personnel, Public Grievances
(iii) Refurbishing of Personnel Administration & Pensions, Government of India, within one year of its constitution.
(iv) Strengthening of Financial Management Systems
(v) Steps to ensure effective administration at the State level ( P.I. Suvrathan )
(vi) Steps to ensure effective District Administration Additional Secretary to Government of India
(vii) Local Self-Government/Panchayati Raj Institutions
(viii) Social Capital, Trust and Participative public service delivery
(ix) Citizen-centric administration
(x) Promoting e-governance
(xi) Issues of Federal Polity
(xii) Crisis Management
(xiii) Public Order
Some of the issues to be examined under each head are given in the Terms of Reference
attached as a Schedule to this Resolution

5. CONTENTS 5.4.7 Transparency and Right to Information Act 73
5.4.8 Use of Information Technology 75
Chapter 1 Introduction 1 5.4.9 Implementation of NREGA in Fifth and Sixth 85
Chapter 2 Review of Public Employment Programmes 5 Schedule Areas
2.1 Wage Employment Programmes in the Past 5 5.4.10 Implementation of NREGA in Areas Affected by Natural 87
2.2 Employment Guarantee Scheme 8 Calamities
2.3 Lessons 8 5.4.11 Relaxation of Certain Restrictive Provisions 88
5.4.12 Records 90
Chapter 3 National Rural Employment Guarantee Act - Implementation 10 5.4.13 Coordination Mechanism 92
Challenges 5.4.14 Building a National Identity 94
3.1 Salient Features of the Act 10
3.2 Shift towards Universalisation and Entitlements 10 Chapter 6 Conclusion 95
3.3 Union Funding and Execution by State Governments 11 Chapter 7 Summary of Recommendations 96
3.4 Centrality of Local Governments 12 LIST OF ANNEXURES
3.5 Administrative and Institutional Arrangements 12 I(1) List of participants at the workshop organized jointly with NIPFP 112
3.6 Special Challenges of Backward Areas 13 I(2)
I(3)
Speech of Dr. C Rangarajan, Chairman, Economic Advisory Council to the Prime Minister
Speech of Chairman ARC
115
123
Chapter 4 Special Problems of Backward Districts 14 I(4) Recommendations of the workshop at NIPFP 129
I(5) List of participants at the workshop organized jointly with eGovernments Foundation 153
Chapter 5 Issues and Recommendations 20 in Bangalore
5.1 Applicability to Other Programmes 20 I(6) Recommendations of the workshop organized jointly with eGovernments Foundation 155
5.2 Change towards Universalisation and Entitlements 20 in Bangalore
I(7) Questionnaire circulated to various stakeholders 160
5.2.1 Guaranteeing Reach 20 IV(1) Statistical profile districts under NREGA 179
5.2.2 Guaranteeing Outcomes 23 V(1) Questions on IT System and response of the Ministry of Rural Development 186
5.2.3 Ensuring Convergence 25 V(2) Summary of Recommendations made by the ‘Expert Group on Planning at the 189
Grassroots Level’ on implementation of PESA
5.2.4 Expanding the Scheme 27 LIST OF ABBREVIATIONS USED
5.3 Union Funding and State Execution 28 ARC Administrative Reforms Commission
5.3.1 Accountability Mechanisms 28 CEGC Central Employment Guarantee Council
5.3.2 Fixing Wage Rates 29 EAS Employment Assurance Scheme
5.3.3 Financial Management System 33 GOI Government of India
IT Information Technology
5.3.4 Preparing Estimates for Works 51 NFFWP National Food for Work Programme
5.3.5 Maintaining Labour Material Ratio 58 NGO Non Governmental Organisation
5.3.6 Mechanism for Procurement 58 NIPFP National Institute of Public Finance and Policy
NREGA National Rural Employment Guarantee Act
5.4 Administrative and Institutional Arrangements 59 NREP National Rural Employment Programme
5.4.1 Strengthening Local Governments 59 PWD Public Works Department
5.4.2 Selection and Maintenance of Works 65 REGS
RLEGP
Rural Employment Guarantee Schemes
Rural Landless Employment Guarantee Programme
5.4.3 Block Resource Centre 66 RTI Right to Information
5.4.4 Entrepreneurship Institutes for the Rural Poor Areas 67 SEGC State Employment Guarantee Council
5.4.5 Monitoring Systems 68 SGRY Sampoorna Grameen Rojgar Yojana
5.4.6 Curbing Corruption and Leakages 71 SHG Self Help Group

6. INTRODUCTION 1
“The measure of a country’s greatness should be based on how well it cares for its most
vulnerable populations”.
Mahatma Gandhi
1.1 There is a shift in Government’s approach towards development. Instead of relying only
on increase in general affluence to enhance the living standards of citizens, the approach is
to consider the acquisition of minimum levels of education, health, employment and nutrition
as basic entitlements, and recognize the key role of the state in providing them to every
needy citizen in the country. In essence, the shift is towards universalization and entitlements.
1.2 There is also increased emphasis on promoting balanced development in which all regions
in the country have the opportunity to develop evenly. This equity-promoting role demands
that greater resources be allocated to the backward regions to remove gaps in the provision
of basic services and human development. As a result, large investments will flow to those
districts of the country which are classified as backward. Admittedly, these are the most
difficult districts to implement development programmes because of poor governance
structures, low organizational capacity, weak infrastructure and unequal power structures.
If the programmes can be implemented with a modicum of success in these backward regions,
it would have garnered mainstreaming of development in the poorest parts of the country.
1.3 There is also a fundamental change in how government programmes are funded and
executed. Increasingly key programmes are being funded by the Union Government and
executed by State Governments. This ensures that on the one hand, no entititlement
programme is made to suffer due to resource constraint and, on the other, funds are available
with greater regularity to implementing districts, blocks and Panchayati Raj Institutions so
that programme outcomes can be seamlessly achieved with local participation, ownership,
initiative and supervision.
1.4 In his budget speech for 2006-07, the Union Finance Minister stated that the bulk of
resources of the Union Government would go to seven flagship programmes, namely, Sarva
Shiksha Abhiyan, Mid-day Meal Scheme, Drinking Water Mission, Total Sanitation
Campaign, National Rural Health Mission, Integrated Child Development Services, and
National Rural Employment Guarantee Scheme. They have been allocated substantially
higher funds during 2006-07. 1

7. Unlocking Human Capital : Entitlements and Governance - a case study Introduction
Table 1.1- The Flagship Schemes (Rs Crores) are part of the emerging paradigm of Union funding and execution by the State Governments.
(Source: Report of the Expert Group on Planning at the Grassroots Level) The challenge under the circumstances would be to maintain the ease and regularity of fund
flow and ensure accountability in achieving the intended programme outcomes without
Sl. Scheme Ministry/ Allocation in Allocation in incentives being distorted because of the duality in funding and execution.
No. Department 2005 -06 2006-07
1.6 Since these flagship programmes are bound by the common objective of delivering
1 Sarva Shiksha Abhiyan Department of 7156 10041 entitlements on a universal scale, it is necessary that they converge at the grassroots and
Elementary their individual planning systems are integrated harmoniously. Such integration would ensure
Education common implementation framework for all the schemes.
2 Mid-day Meal Scheme Department of 3010 4813 1.7 Above all, adequate and appropriate administrative and institutional arrangements are
Elementary essential for the success of these programmes. In their design, these programmes provide for
Education a multi-tier structure of administrative and institutional arrangements for implementation
and monitoring with specified roles and responsibilities. The agencies involved are the
3 Drinking Water Mission Department of 3645 4680 respective ministries of the Union Government, departments of the State Governments and
Drinking Water the local governments. The structure of implementation and monitoring, both elaborate
Supply and complex, underscores the criticality of various institutional structures working in tandem:
at the minimum, what is required for the successful implementation of the programmes is
4 Total Sanitation Department of 630 720 both vertical coordination of different tiers of governments and horizontal coordination across
Campaign Drinking Water departments for execution of the programmes through the local government.
Supply
1.8 Of the seven flagship programmes, the Rural Employment Guarantee Scheme under
5 National Rural Health Ministry of Health 6553 8207 the National Rural Employment Guarantee Act (hereinafter referred to as NREGA or simply
Mission and Family Welfare ‘the Act’) is certainly the largest in terms of its outlay, coverage and expected outputs. In
particular, suitable administrative and financial management systems need to be put in
6 Integrated Child Ministry of HRD - 3315 4087 place in order to achieve the desired objectives of NREGA in terms of the benefits of the
Development Services Department of programme reaching the intended groups to build capacity to implement the Scheme at
Women and Child decentralized levels and create a proper information system not only to implement the Scheme
Welfare effectively but also to ensure accountability and transparency.
7 National Rural Ministry of Rural 10000 14300 1.9 Evolving appropriate administrative and financial management systems is the key to the
Employment Guarantee Development success of NREGA. The Administrative Reforms Commission (ARC) attaches the highest
Scheme (including importance to these systems because once they are tried and tested in the implementation of
SGRY) NREGA, lessons can be drawn and used for other flagship programmes as well.
Total 34309 46848 1.10 It is in this context that ARC undertook a study of strengthening of administrative and
1.5 All these flagship programmes signal a change in the development approach towards financial management systems for effective implementation of NREGA. To initiate a process
universalization and entitlements. To that extent a key consideration in the implementation of wide consultations, the ARC and the National Institute of Public Finance and Policy
of these programmes is to guarantee the reach and the outcomes of the programmes. These (NIPFP) jointly organized a National Workshop which was inaugurated by
2 3

8. Unlocking Human Capital : Entitlements and Governance - a case study
Dr. C. Rangarajan, Chairman, Economic Advisory Council to the Prime Minister. The
Workshop was attended by representatives from ministries/departments of the Union
2
Government, Secretaries of the State Governments in charge of Rural Development, officers
from the districts, academicians, economists, activists from NGOs and other stakeholders.
The list of participants and recommendations of the Workshop are at Annexures I(1), and REVIEW OF PUBLIC EMPLOYMENT PROGRAMMES
I(4) respectively. Another workshop was organized jointly with eGovernments Foundation
with participation of government functionaries, international experts with domain knowledge
and representatives of a number of NGOs. The list of participants and recommendations are 2.1 Wage Employment Programmes in the Past
at Annexures I(5), and I(6) respectively.
2.1.1 Government of India has taken up a number of wage employment programmes starting
1.11 The Commission formulated a comprehensive questionnaire reflecting several aspects with the Rural Manpower Programme in 1960. Productive absorption of underemployed
concerning the implementation of the Act and circulated it to the State Governments seeking and surplus labour in rural areas has, in fact, been a major focus of planning for rural
responses from Panchayats, Chief Executives of District Panchayats/Collectors and NGOs development in order to provide direct supplementary wage employment to the rural poor
{Annexure I(7)}. The Commission visited some of the states and held discussions with through public works. The following table describes the programmes undertaken by
government functionaries and other important stakeholders. In order to assess the situation Government of India over a period of time :
at the ground level, the Commission conducted field visits in the states of Karnataka, Tamil
Nadu, Jharkhand, Bihar and Rajasthan. Based on all these inputs, the Commission has Table 2.1 : Wage Employment Programmes 1
identified issues and constraints and has suggested solutions and made recommendations.
Programmes Period Objectives
Rural Manpower 1960-1969 Provide employment to 2.5 million persons
Programme (RMP) in areas exposed to pronounced seasonal
employment.
Crash Scheme for Rural 1971-1974 Provide employment to 1000 persons in 350
Employment (CSRE) districts through labour intensive works and
create durable assets.
Drought Prone Areas 1971-1973 Mitigate the severity of scarcity conditions
Programme (DPAP), Rural by organizing labour intensive and
Works Programme (Later production oriented works so as to generate
restructured as Area considerable employment.
Development Programme)
Food for Work 1977-1980 (i) Generate gainful employment to a
Programme (FWP) large number of unemployed and under-
employed persons, both men and women
in the rural areas which will improve their
incomes and consequently their nutritional
levels. (ii) Create durable community assets
4 5
1
Extracted from Drought 2002, Department of Agriculture and Cooperation, Ministry of Agriculture, GOI

9. Unlocking Human Capital : Entitlements and Governance - a case study Review of Public Employment Programmes
Programmes Period Objectives Programmes Period Objectives
and strengthen the rural infrastructure employment. Secondary objective: Generation
which will result in high production and of supplementary employment for
better living standard in rural areas; and unemployed poor (Below Poverty Line) in
(iii) Utilise surplus foodgrains for the rural areas.
development of human resources.
Sampoorna Grameen 2001 Provide wage employment, food security,
National Rural Employment 1980-1989 Generate additional gainful employment; Rozgar Yojana (SGRY) and creation of durable assets (the scheme
Programme (NREP) create durable community assets; and raise was formed by merging EAS and JGSY).
nutritional standards of the poor.
2.1.2 There have been a number of evaluation studies of these wage employment
Rural Landless Employment 1983-1989 Provide 100 days of employment to at programmes. They reveal
Guarantee Programme least one member of a landless household.  Funds were not utilized in full. Lack of planning; untimely release of funds,
(RLEGP) both from the Union Government to the District Rural Development Agencies
Jawahar Rozgar 1989-1999 Primary objective : Generate additional (DRDAs) and from the DRDAs to blocks; and other factors such as inability of
Yojana (JRY) gainful employment for unemployed and the states to generate matching resources were important factors that contributed
under-employed persons, both men and to low utilization of funds.
women, in rural areas through creation of  Coverage of villages and the target group was extremely low.
rural economic infrastructure, community  A large part of the funds was used less in labour intensive activities and more
and social assets, particularly, in favour of in capital intensive activities. The normative capital labour ratio was not
the poor and with an aim at improving adhered to.
quality of life in rural areas.
 Majority of beneficiaries received less than 30 days of wage employment in a
Employment Assurance 1993-1999 Provide 100 days of assured employment year. Non-poor households were also found to have been the beneficiaries of
Scheme (EAS) to a person in 1752 backward blocks these programmes.
during lean agricultural periods in the  There was bogus reporting to achieve targets.
form of manual work.
 These programmes created income for the rural poor but left very few durable
Food for Work 2000-2002 Augment food security through wage assets.
Programme II employment in drought affected rural  The programmes encouraged corruption, both at political and administrative
areas. levels.
Jawahar Gram Samridhi 1999-2001 Primary Objective: Creation of demand  Fudging of muster rolls and measurement books was common and resulted in
Yojana (JGSY) driven community village infrastructure, loss of funds that could have been otherwise invested in creation of rural
including (i) durable assets at the village infrastructure.
level and (ii) assets to enable the rural poor  Participation of women was lower than the stipulated norm of 30 per cent.
to increase the opportunities for sustained  In most cases, contractors were involved and the use of machinery was also
reported, though the schemes expressly forbade it.
6 7

10. Unlocking Human Capital : Entitlements and Governance - a case study Review of Public Employment Programmes
2.2 Employment Guarantee Scheme 2.3.4 Lack of Capability
Very few elected Panchayat chiefs and other functionaries were given training. This
2.2.1 The Employment Guarantee Scheme (EGS) started in Maharashtra in the early 1970s. underscores the importance of building capability in the Panchayats through appropriate
EGS guarantees employment to persons above 18 years of age who are willing to do unskilled training and orientation programmes. Training of officials/representatives of the Panchayat
manual work on a piece rate basis. The scheme is self-targeting. The objectives are to bodies is the key to the effective planning and implementation of employment programmes.
improve welfare of the households through provision of employment and contribute to the
development of the rural economy in the long run through strengthening of infrastructure. 2.3.5 Focus on Physical Work
An urban employment tax is used to partially finance EGS. The earlier employment generation programmes/schemes were inherited from the
colonial relics of famine relief works introduced after the Deccan Riots in 1890, and
2.2.2 Evaluation studies of EGS show these focused on physical work. In the process of exploiting this country as a dependent
 The programme continues after 30 years without any decrease in demand for economy to accelerate the advent of the industrial revolution, our knowledge based rural
unskilled wage work economy was destoyed by the colonial power. There is therefore, a need to redefine
 Modest impact on poverty reduction and on unemployment reduction employment programmes through an appropriate use of knowledge and skills in the works.
This approach will herald a self-sufficient rural economy. It will also help in convergence of
 Distress migration of workers from backward region continues rural-urban divide.
 Quality of the assets created and their maintenance is not satisfactory 2.3.6 Leakages
 Failure to adopt a local development policy to promote overall area development Leakages were a common feature in the implementation of employment programmes.
Fudging of muster rolls and measurement books was very common. In most cases, contractors
2.3 Lessons were involved.
2.3.1 Inadequate Planning for Assets
The most glaring weakness is the absence of careful planning for assets. Inadequate planning
and serious flaws in project selection had adverse impact on the productivity and quality of
the physical capital created. This underscores the importance of a holistic development
plan fully integrated with the implementation of other development initiatives.
2.3.2 Lack of People’s Participation
The process of planning and implementation was flawed because of lack of people’s
participation. An important input from the evaluation studies was that in the absence of
people’s participation, the bureaucracy dominated the process of planning and
implementation, with the result that the approach was technocratic and top-down.
2.3.3 Limited Role of Panchayats
Although Panchayats were associated with the implementation of some of the wage
employment schemes, they played only a limited role. The involvement of Panchayats,
however, did strengthen the planning and implementation of the employment schemes
wherever they were associated. This highlights the need for giving a greater role to the
Panchayats in the implementation of wage employment programmes.
8 9

11. National Rural Employment Guarantee Act -- Implementation Challenges
3.2.2. Guaranteeing Outcome
The outcome envisaged is the provision of livelihood security to the rural poor in the short
3 NATIONAL RURAL EMPLOYMENT GUARANTEE ACT -- IMPLEMENTATION
CHALLENGES
term by providing guaranteed employment on a universal scale and asset creation through
the process of employment to generate infrastructure for poverty alleviation on a permanent
basis. The wages should be sufficient to meet the daily subsistence needs of workers’ household
and provide livelihood security. In the long term, the assets created in the programme should
be durable and productive enough to promote sustainable development and livelihood systems
for the rural poor. This would call for designing a monitoring mechanism by strengthening
3.1 Salient Features of the Act institutional structures at the level of the local government so that resources can be used
optimally for the purpose of both employment and asset creation.
3.1.1 The National Rural Employment Guarantee Act represents a paradigm shift: it provides
assured employment for hundred days to a rural household. The key to this legislation is in 3.2.3. Ensuring Convergence
the word ‘guarantee’: it makes employment a right, something that people can expect, It is necessary to integrate the implementation of NREGA with the implementation of
demand and enforce. NREGA is a landmark initiative in yet another significant way. It not other flagship development initiatives and achieve convergence. This would require
only enhances the income of the poor in the short term by providing employment, but by preparation of a holistic integrated development plan at the local level and includes works
creating durable assets through the process of employment, it generates the much-needed to be identified, selected and undertaken systematically as part of the long-term strategy for
productive infrastructure for poverty alleviation on a sustained basis. To that extent, it rural development.
provides a safety net to the rural poor.
3.2.4 Method of Expansion
3.1.2 The challenges for the successful implementation of NREGA stem from five factors, In the first phase, NREGA is being implemented in 200 identified backward districts. In
namely (a) shift towards universalisation and entitlements, (b) funding by the Union subsequent phases, it will be expanded to cover the rest of the country. The expansion in the
Government and execution by State Governments, (c) centrality of Local Governments, (d) coverage of the Scheme should be both need-based and demand-based. In many of the
administrative and institutional arrangements and (e) problems in the backward areas. districts notified for implementation of NREGA in the first phase, there are some blocks
which are well developed while others are underdeveloped, thus dragging down the overall
3.2 Shift towards Universalization and Entitlements development indicators and resulting in the district being included under NREGA. The
3.2.1 Guaranteeing Reach district may therefore not be the ideal unit for implementation under this Scheme.
The distinguishing feature of NREGA is that it provides legal guarantee to all households in 3.2.5 Gender Balance
need of employment and embodies the commitment of the state to honour that legal There is need to achieve appropriate gender balance in the implementation of NREGA.
guarantee within a specified time frame. In other words, each State Government will have This is important because of the twin considerations of casualisation of labour and feminization
to evolve a well coordinated approach to equate supply of employment in accordance with of poverty. Steps have to be taken to ensure that women actively participate in NREGA, so
the demand for universalization. This becomes all the more necessary as there is no supply that the Scheme becomes an important means for empowering women and mainstreaming
side selection of beneficiaries. Under the circumstances, there is need for in-depth gender in development.
understanding of region specific labour demand and its seasonality so that a demand based
shelf of projects can be implemented at a frequency that matches with the demand for work 3.3 Union Funding and Execution by State Governments
instead of supply side provisioning. Failure to do so may result in imprudent use of funds as
inability to provide employment on demand will impose the burden of compensation in the 3.3.1 Fund Flow
form of unemployment allowance on the State Governments. The implementation of NREGA is mainly funded by the Union Government. As it is a
demand based provisioning, flow of funds from the Union Government to the local
10 11

12. Unlocking Human Capital : Entitlements and Governance - a case study National Rural Employment Guarantee Act -- Implementation Challenges
government needs to be ensured according to the demand. Thus, a clear mechanism for 3.5.2 Corruption and Leakages
flow of funds needs to be evolved, to be driven by demand rather than through the normal Experience of the implementation of the previous wage employment programmes shows
bureaucratic procedure. This also requires a good deal of coordination between providing that leakages were a common feature and there was large-scale association of contractors
work and provisioning of funds. and fabrication of muster rolls. Steps have to be taken to ensure that these do not occur in
the implementation of NREGA. At a minimum, it should be ensured that funds reach the
3.3.2 Accountability workers in a transparent way. In order to prevent corruption and leakages, there is need for
Because of the duality in respect of funding and execution, it is possible that accountability simultaneous monitoring. Along with Gram Sabhas, self-help groups, local monitoring
could get blurred. It is, therefore, necessary to delineate the accountability mechanisms in committees and NGOs could possibly be involved in simultaneous monitoring of the
clear and unambiguous terms. implementation of the Scheme under NREGA. In order to institutionalize simultaneous
3.3.3 Moral Hazards and Distorted Incentives monitoring, there is need to define a clear charter of roles and responsibilities through activity
The funding and executing agencies being different, there is a likelihood that incentives mapping and capacity building of all monitoring agencies.
may be distorted leading to use of resources in a manner that may not exactly maximize 3.5.3 Transparency
programme outputs. Care has therefore to be taken to ensure that the funds are used There is need for maintaining total transparency, particularly with regard to selection of
exclusively for furthering the goals of the programme. beneficiaries, identification of works and preparation of estimates. Muster rolls should be
3.4 Centrality of Local Governments freely available for inspection. Payments to workers should be made publicly on pre-
announced dates, when the muster roll is also made public. Steps should be taken to make
3.4.1 Local Governments the entire implementation process totally transparent. In any case, each Panchayat is a
Panchayati Raj Institutions are the designated agencies for the execution of schemes under public authority under the Right to Information Act and has to discharge all obligations
NREGA. Panchayats are responsible for identification, execution and supervision of projects stipulated under that Act.
as per the recommendations of the Gram Sabha and the Ward Sabhas. Gram Sabhas and the 3.5.4 Community Participation
Ward Sabhas have the twin responsibility for not only choosing the list of projects for There should be participation of the community in planning, implementing, supervising
implementation under the Scheme but also ensuring accountability. For this purpose the and monitoring of the schemes. It is of key importance that the community is associated
Gram Sabhas have been given power to conduct regular social audit of individual schemes. with decision making on the choice of works, in the absence of which it will be left to the
However, given the track record and capacity levels of the Panchayati Raj Institutions across bureaucracy to determine works resulting in a bureaucratic and top-down approach.
the country, particularly in the backward districts, there is need for capacity building in
these institutions to enable them to discharge their responsibilities. 3.6 Special Challenges of Backward Areas
3.5 Administrative and Institutional Arrangements As a first step, the programme is being implemented in 200 districts in the country
3.5.1 Technology which represent areas with high concentrations of poverty. Admittedly, these are the most
Given the scale of the programme and the possibility that its complexity may grow over difficult districts to implement the programme due to weak governance structures,
time, it is important that operations be backed by a robust technology backbone. The key low organizational capacity and highly stratified social and economic power structures.
objectives that technology can facilitate in the implementation of NREGA are efficiency, In addition, most of these districts are located in difficult terrain with poor accessibility and
expediency, accountability, transparency, prevention of leakages and flexibility to different poor infrastructure. These districts with special challenges are more comprehensively dealt
administrative demands. with in the next chapter.
12 13
1

13. Special Problems of Backward Districts
average annual rainfall of about 3000 mm (Bongaigaon, Assam) there are others with an
annual average rainfall of about 500 mm (Ahmednagar, Maharashtra) . There are 21 districts 5
4
in the Himalayan region and the North East which are completely mountainous. Besides, a
number of districts in Jharkhand, Chhattisgarh, Maharashtra, Madhya Pradesh, Andhra
SPECIAL PROBLEMS OF BACKWARD DISTRICTS Pradesh and Orissa have hilly terrain. There are also wide variations in the size and population
of districts. Sheohar district in Bihar has an area of 443 sq. km. while Mehboobnagar in
Andhra Pradesh has an area 41 times larger (18432 sq. km.). Similarly, Upper Subansiri in
Arunachal Pradesh has a population of 39590, whereas South 24 Parganas in West Bengal
4.1 The districts selected for implementation in the first phase pose a major challenge for has a population 147 times greater {Fig.4.1 and 4.2}.
implementation because of their special problems. Out of the 200 districts, 64 are plagued
by extremism and 69 districts are included in the Scheduled Areas and Tribal Areas .
2 3 4.3 These districts are also the most backward regions in terms of connectivity and spread of
There are districts where banking and post office infrastructure. At present there are 68339 bank branches in the
Panchayats are non-existent country ; thus there is one branch for a population of 15000. An analysis of the bank coverage
6
and in many places, non- in a few districts given in Table 4.1, highlights the weak bank network in these areas.
functional. Difficult and
varied topography makes Table 4.1 – Banking infrastructure in some districts
adoption of uniform norms
impractical. There is also Sl. District State No. of Bank Total Average population
the problem of not having
7
No. Branches population per branch
regular and dedicated 1 Dhamtari Chhattisgarh 40 706591 17665
functionaries for many of
these Panchayats. Given 2 Pakur Jharkhand 40 701664 17542
these constraints, implementation of NREGA in these districts would require well focused
area specific responses. 3 Shahdol Madhya Pradesh 70 1575307 22504
4.2 Widespread poverty is a 4 Bhojpur Bihar 89 2243144 25203
common feature of all these
districts. Annexure IV(1) provides 5 Thiruvannamalai Tamil Nadu 94 2186125 23256
a statistical profile of these 200
districts. It can be seen that a 4.4 The socio-economic indicators of most
large number of them are located of these districts are generally below the
in arid and semi-arid regions. In national average. Out of these 200
fact, 94 districts are covered districts, 148 have literacy lower than the
under the Drought Prone Areas national average (65.38%) . The situation
8
Programme and 8 districts are in respect of female literacy is similar: 154
covered under the Desert districts have rates lower than the national
Development Programme . 4 average of 54.16% (Figure 4.3). Also, the
9
While some districts have an proportion of SC/ST population in most
14 2
Source: Ministry of Home Affairs, Government of India
5
District Website (http://ahmednagar.gov.in)
6
Source: RBI website (www.rbi.org.in)
15
3 7
Source: Ministry of Tribal Welfare, Government of India : Annual Report, 2005-06 Source: District websites (http://dhamtari.nic.in; http://pakur.nic.in; http://shahdol.nic.in) and District Office, Bhojpur
4
Source: Website of Department of Land Resources, Ministry of Rural Development, Government of India (http:// & Thiruvannamalai districts
8 and 9
dolr.nic.in) Source:http://www.educationforallindia.com

14. Unlocking Human Capital : Entitlements and Governance - a case study Special Problems of Backward Districts
of these areas is higher than in other areas. In 98 of these districts, the proportion of responsibilities in respect of Gram Sabha and Panchayat. For example, PESA stipulates that
SC population is well above the national figure of 16.2% (Fig 4.4). Similarly, 116 districts the Gram Sabha will approve plans, programmes and projects before they are taken up for
have more than 8.2 per cent of ST population, which is the national average and in 41 of implementation by the Panchayat at the village level, and it would identify beneficiaries for
them (this does not include Jamtara, Latehar, Simdega and Saraikela-Kharsawan districts of poverty alleviation and other programmes and certify utilization of funds by the Panchayat
Jharkhand for which Census 2001 figures are not available) STs constitute a majority of the at the village level. To that extent, the implementation of PESA will have a bearing on how
population (Fig. 4.5). NREGA is implemented in the Fifth Schedule Areas.
4.5 These districts are primarily agricultural and in 115 districts, the percentage of agricultural 4.8 While all the states in the Fifth
labourers in the total rural working Schedule Areas have enacted requisite
population is higher than the national compliance legislations by amending the
average of 33 per cent. This indicates respective Panchayati Raj Acts, certain
the prevalence of large scale landlessness gaps continue to exist, which have adverse
in these districts combined with lack of implications for the effective
effective employment opportunities in implementation of NREGA. For example,
the non-agricultural sector. This results most states are yet to amend the subject
in lower incomes for a large section of laws and rules; and although provisions
the rural population and is a major in such laws that are inconsistent with
contributor towards the backwardness those in PESA are legally invalid after
of these districts, apart from constraints December 1997; they continue to be
imposed by agro-climatic and followed. Power statutorily devolved upon Gram Sabhas and Panchayats is not matched by
physiographic conditions. concomitant transfer of funds and functionaries, resulting in the non-exercise of such power.
4.6 Panchayati Raj Institutions are the designated agencies for implementing NREGA. In 4.9 The nature of local government varies considerably in these 200 districts. As stated
some of the 200 districts, Panchayats do not exist, or are non-functional. The Gram Sabhas earlier, the constitution of local bodies in Schedule Areas under the Fifth Schedule will be
which are required to choose the shelf of projects and conduct social audit of the works done considerably different after the effective implementation of PESA. Similarly, in some of the
are dormant in some cases. The priority, therefore, should be to activate the Panchayati Raj Sixth Schedule Areas, such as, Mizoram and Meghalaya, where Part IX of the Constitution
Institutions in these districts for effective implementation of NREGA. is not applicable, the constitution of local bodies is different.
4.7 In the areas under the Fifth Schedule 4.10 The size and area of Gram
of the Constitution, where as many as 63 Panchayats also varies as can be seen from
of these backward districts are located, the Figures 4.6 & 4.7. For example, the
quality of local bodies was expected to average area per Panchayat in Vaishali
improve after the enactment of the district in Bihar is 7 Sq. km., while that
Panchayats [Extension to the Scheduled of Wayanad district in Kerala is 85 Sq.
Areas] Act, 1996 [PESA] in December km. The average population per
1996. PESA has, in fact, important Panchayat in Hingoli district in
implications for the administrative Maharashtra is 1475 while that in
framework of these areas, because it spells Palakkad district in Kerala is 25,121.
out the functions, powers and These variations have a direct bearing on
16 17
21

15. Unlocking Human Capital : Entitlements and Governance - a case study Special Problems of Backward Districts
the norms for administrative staffing and a uniform delivery mechanism for all the two the work of two or more Panchayats. Most of them are promoted from the cadre of ‘Dalapatis’
hundred districts is untenable. The administrative approach therefore needs to be calibrated [local government employee with educational qualification of VII standard] and are therefore
in such a way that it takes into account region specific variations. not professionally competent.
4.11 There is ample evidence that the delivery of basic public services, particularly those 4.13 The situation is far better in the more progressive states where the additional staff
intended to benefit the poor and weaker sections, has functioned relatively ineffectively in sanctioned has enhanced the capacity of the administrative machinery to implement schemes
these backward districts, even when funds have not been a constraint. It has therefore to be like NREGA. However, in some backward districts, additional posts sanctioned have been
recognized that availability of funds, though necessary, is not sufficient for the successful shown against the existing staff of Panchayati Raj Institutions, as a result of which no actual
delivery of basic public services. The capability of the administrative system to optimally recruitment has taken place.
use funds and realize results on the ground is equally important. Delivery of basic public
services in these backward districts has suffered due to, on the one hand, weak administration, 4.14 Achieving gender equity is important in the implementation of NREGA. A comparison
understaffing and lack of motivation and on the other, large-scale leakages. The reach of the of male and female literacy rates in a sample of ten (10) districts highlights the widely
administrative network is weak, leading to difficulties in implementation of most development prevalent gender gaps. (Fig. 4.8). In a large number of traditional tribal councils also, there
schemes, e.g. in the North Eastern states, in many areas funds are channelised through is male domination. All these are indicative of gender inequities and underscore the need for
autonomous district councils despite the fact that elections have not been held to these a proactive approach and affirmative action to ensure women’s full participation.
councils for a long time. It is, therefore, necessary that the issue of strengthening the
4.15 There is need to recognize that conditions prevailing in these backward districts may
administrative apparatus is addressed on priority.
impede the smooth flow of funds for implementation of NREGA. The usual channels for
4.12 In most of these backward districts, the administrative functionaries in the Panchayati transfer of funds in the more progressive states may not work in many of these districts. For
Raj Institutions are either not available in adequate numbers or do not function. For example, example, the normal channel for transfer of funds may not be possible in districts infested
in Bhojpur district in Bihar, there are only 134 Panchayat Secretaries as against 228 Panchayats by extremism, and funds may have to be transferred in small sums. Such situations require
in the district. The result is that the Panchayat Secretaries are overburdened, looking after an innovative approach and a certain degree of pragmatism in finding solutions.
4.16 Backward districts pose implementation challenges that are as varied as the terrain is
inhospitable. Given the heterogeneity and spatial dimensions of the constraints in these two
hundred backward districts, the approach of “one-size-fits-all” is not feasible. In the ultimate
analysis, the approach should be one that takes into account the heterogeneity, specific
problems and constraints, peculiar to each district.
18 19